Commission Regulation (EU) No 1042/2010 of 16 November 2010 imposing a provisional anti-dumping duty on imports of coated fine paper originating in the People’s Republic of China

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (1) (the basic Regulation), and in particular Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

(1) On 18 February 2010, the European Commission (the ‘Commission’) announced by a notice published in the Official Journal of the European Union (2) (Notice of initiation), the initiation of an anti-dumping proceeding concerning imports into the Union of coated fine paper originating in the People’s Republic of China (‘PRC’ or the ‘country concerned’).

(2) The anti-dumping proceeding was initiated following a complaint lodged on 4 January 2010 by CEPIFINE, the European association of fine paper manufacturers, (‘the complainant’) on behalf of producers representing a major proportion, in this case more than 25 % of the total Union production of coated fine paper. The complaint contained prima facie evidence of dumping of the said product and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding.

(3) The Commission officially advised the complainant, other known Union producers, the known exporting producers in the PRC and an association of producers (a paper association), the representatives of the country concerned, known importers and known users of the initiation of the proceeding. The Commission also advised producers in the United States of America (USA) and an association of producers (a paper association) and, at a later stage, a producer in Thailand of the initiation of the proceedings, as the USA and Thailand were each envisaged as a possible analogue country. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set out in the Notice of Initiation. All interested parties who so requested and showed that there were particular reasons why they should be heard were granted a hearing.

(4) In view of the apparent high number of exporting producers, Union producers and unrelated importers, sampling was envisaged in the Notice of initiation in accordance with Article 17 of the basic Regulation. In order to enable the Commission to decide whether sampling would be necessary and if so, to select samples, all known exporting producers and their known paper association, all known Union producers and unrelated importers were asked to make themselves known to the Commission and to provide, as specified in the Notice of initiation, basic information on their activities related to the product concerned (as defined in Section 2.1 below) during the period from 1 January 2009 to 31 December 2009. The authorities of the PRC were also consulted.

(5) As explained in recital 28 below, two Chinese exporting producer groups provided the requested information and agreed to be included in a sample. On the basis of the above it was decided that sampling was not necessary for exporting producers in the PRC.

(6) In order to allow the known exporting producers in the PRC to submit a claim for market economy treatment (MET) or individual treatment (IT), if they so wished, the Commission sent claim forms to the exporting producers known to be concerned and to the authorities of the PRC. As explained in recitals 33 and 53 below, one group of exporting producers in the PRC requested MET pursuant to Article 2(7) of the basic Regulation or IT should the investigation establish that it did not meet the conditions for MET, while the other group of exporting producers in the PRC requested IT.

(7) As explained in recital 29 below, it was decided that sampling was not necessary for Union producers.

(8) As explained in recital 30 below, it was decided that sampling was not necessary for unrelated importers.

(9) The Commission sent questionnaires to all parties known to be concerned and to all other parties that requested so within the deadlines set out in the Notice of initiation, namely the complainant, other known Union producers, the known exporting producers in the PRC and an association of producers (a paper association), the representatives of the country concerned, known importers, known users, known producers in the USA, an association of producers (a paper association) in the USA and a producer in Thailand.

(10) Replies to the questionnaires and other submissions were received from two groups of Chinese exporting producers, the complainant association (the European association of fine paper manufacturers or ‘CEPIFINE’), the four complainant Union producers and one additional Union producer, 16 unrelated importers and traders, 17 users and 3 printing and paper associations and from one producer in the USA which was envisaged as analogue country.

(13) The investigation of dumping and injury covered the period from 1 January 2009 to 31 December 2009 (the ‘investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2006 to the end of the IP (the period considered).

(14) The product concerned is coated fine paper which is paper or paperboard coated on one or both sides (excluding kraft paper or kraft paperboard), in either sheets or rolls, and with a weight of 70 g/m2 or more but not exceeding 400 g/m2 and brightness of more than 84 (measured according to ISO 2470-1), originating in the PRC (‘the product concerned’ or ‘CFP’) currently falling within CN codes ex 4810 13 20 , ex 4810 13 80 , ex 4810 14 20 , ex 4810 14 80 , ex 4810 19 10 , ex 4810 19 90 , ex 4810 22 10 , ex 4810 22 90 , ex 4810 29 30 , ex 4810 29 80 , ex 4810 99 10 , ex 4810 99 30 and ex 4810 99 90 .

(15) CFP is high quality paper and paperboard generally used for printing of reading material such as magazines, catalogues, annual reports, yearbooks. The product concerned includes both sheets and rolls suitable for use in sheet-fed (cut star) printing machines. Rolls suitable for use in sheet-fed presses (cutter rolls) are designed to be cut into pieces before printing, and are thus considered to be substitutable and directly competitive with sheets.

(16) The product concerned does not include rolls suitable for use in web-fed presses. Rolls suitable for use in web-fed presses are defined as those rolls which, if tested according to the ISO test standard ISO 3783:2006 concerning the determination of resistance to picking – accelerated speed method using the IGT tester (electric model), give a result of less than 30 N/m when measuring in the cross-direction of the paper (CD) and a result of less than 50 N/m when measuring in the machine direction (MD). Also, in contrast to rolls used in sheet-fed printing machines, rolls for use in web-fed presses are normally directly fed into the printing machines and are not cut beforehand.

(17) One party claimed that the product scope of the investigation was too narrowly defined and that rolls of CFP suitable for web-fed printing should have been included. It was claimed that web-fed rolls and the ones included in the scope of the present investigation (cutter rolls and sheets) shared the same basic technical and physical characteristics and were not distinguishable from one another. Furthermore it was claimed that both were used for high quality printing and that they were therefore to some extent interchangeable.

(18) However, in contrast to the above claim the investigation confirmed that there are indeed distinct technical and physical characteristics such as humidity and stiffness between paper used in web-fed and the one used in sheet-fed printing. The investigation further confirmed that the technical characteristics listed in recital 16 above are unique to rolls suitable for use in web-fed presses. Due to these differences paper used in web-fed or the one used in sheet-fed printing cannot be used in the same type of printing machine and they are therefore not interchangeable. It is noted that all parties agreed that the two types of paper are distinct as regards their surface strength and tensile strength.

(19) Furthermore, the party in question claimed that customers view CFP in the form of sheets, cutter rolls and web rolls as a single market and thus distribution channels are the same. The different technical characteristics are only reflected in minor price differences among these product groups.

(20) However, the investigation revealed that the two types of rolls are also non-interchangeable from an economic point of view because rolls for web-fed printing are used for mass-volume printing jobs and are generally made to order and require just-in-time delivery therefore these products are not stocked by intermediaries but are shipped directly to the final users, i.e. they are also sold through a different distribution channel than rolls used in sheet-fed printing. The different production process and the different economies of scale in the printing process are reflected in distinct price differences.

(21) On this basis, these claims were rejected.

(22) The same party claimed that the resistance to picking was not a suitable technical characteristic for differentiating between products as this test would be of a general nature and test results may moreover be affected by the moisture content of the paper tested. The party further claimed that on the basis of some other tests undertaken for a sample of CFP for web-fed printing (including products produced by the Union industry) it can be seen that these products would not fall into the current product definition which would show that the criterion of ‘resistance to picking’ for distinguishing CFP used in web-fed and sheet-fed printing is unsuitable. Firstly, no evidence was submitted with regard to the claim that the moisture content of the paper may render test results for ISO test standard ISO 3783:2006 unreliable. Secondly, as far as the testing of samples of CFP for web-fed printing is concerned, such tests were not made by an independent expert and the reliability and objectivity of such tests were therefore considered insufficient to base any conclusions thereon. Therefore, the resistance to picking was provisionally found to be a reliable technical characteristic to distinguish between CFP used in web-fed and the one used in sheet-fed printing.

(23) During the course of the investigation, certain parties also claimed that multi-ply paper and multi-ply paperboard (as defined in the next recital) should be excluded from the scope of the investigation. They claimed that multi-ply paper and multi-ply paperboard had different physical characteristics such as multiple plies, higher stiffness and lower density and that the final use of these products was different as these are usually used for folding carton and packaging applications. These parties finally claimed that single-ply and multi-ply paper and paperboard would be easily distinguished by their physical appearance.

(24) Multi-ply paper and multi-ply paperboard, as defined in the Harmonised System Explanatory Notes to subheading 4805 , are products obtained by pressing together two or more layers of moist pulps of which at least one characteristics different from the others. These differences may arise from the nature of pulps used (e.g. recycled waste), the method of production (e.g. mechanical or chemical) or, if the pulps are of the same nature and have been produced by the same method, the degree of processing (e.g. unbleached, bleached or coloured).

(25) The investigation showed that multi-ply paper and paperboard has indeed some different physical and technical characteristics; more specifically it has several layers of pulp giving it an increased rigidity. Multi-ply paper and paperboard is produced by a different production method requiring a different paper machine than the one used for the production of CFP, as in the production process several layers of pulp are layered into a single product. Finally, multi-ply paper and paperboard serves different purposes (mainly packaging) compared to CFP that is used for high quality printing of promotional material, magazines, etc. Multi-ply paper and paperboard as defined in recital 24 is therefore provisionally considered as not being the product concerned. Consequently, the CN codes mentioned covering imports of multi-ply paper and multi-ply paperboard are provisionally excluded from the scope of the investigation.

(26) Finally, one Chinese producer claimed that so called ‘paperboard’ should be excluded from the scope of the investigation as it does not fall under the definition of fine paper (whether coated or not) because of alleged differences in its weight, thickness and rigidity. It was found that the term ‘paperboard’ is generally used for paper with high substances making the paper in general heavier, i.e. ‘paperboard’ is commonly defined as paper with a basis weight of above 224 g/m2. However, the investigation revealed that the difference in weight does not have a significant impact on the remaining physical and technical characteristic and end uses which would it make distinguishable from the product concerned. It is also noted that, as outlined in recital 14, all CFP with a weight of 70 g/m2 or more but not exceeding 400 g/m2 were explicitly included in the definition of the product concerned. Therefore paperboard is provisionally considered as being the product concerned.

(27) The product concerned, the product produced and sold on the domestic market of the PRC, and on the domestic market of USA, which served provisionally as the analogue country, as well as the product manufactured and sold in the Union by the Union producers were found to have the same basic physical and technical characteristics as well as the same basic uses. They are therefore provisionally considered as alike within the meaning of Article 1(4) of the basic Regulation.

(28) Only two exporting producers groups in the PRC came forward and replied to the request for sampling data in the Notice of initiation. One group (Chenming) represents 2 related exporting producers while the other group (APP) represents 4 related exporting producers. The cooperating exporting producers represent the total exports of the product concerned from the PRC to the Union. In these circumstances, the Commission decided that sampling was not necessary for exporting producers in the PRC.

(29) In view of the potentially large number of Union producers sampling was envisaged in the Notice of initiation in accordance with Article 17(1) of the basic Regulation. However, after examination of the information submitted and given that only four Union producers came forward within the deadlines set in the Notice of initiation, it was decided that sampling was not necessary. The four cooperating producers were considered to be representative (covering 61 % of total production) of the Union industry as defined in recital 77 below. The information provided by the cooperating companies was verified on-spot and was used for the micro indicators as explained in recital 90.

(30) In view of the potentially large number of importers, sampling was envisaged for importers in the Notice of initiation in accordance with Article 17(1) of the basic Regulation. However, after examination of the information submitted and given the low number of importers which indicated their willingness to cooperate, it was decided that sampling was not necessary.

(31) The general methodology set out below has been applied to the cooperating exporting producers in the PRC.

(33) Only one exporting producers group (i.e. APP) in the PRC requested MET pursuant to Article 2(7)(b) of the basic Regulation. The party submitted 33 MET claim forms referring to its four related exporting producers and a series of other related companies involved in the product concerned i.e. pulp mills, chemical companies, forestry companies (upstream producers) and domestic trading companies.

(34) Account taken of the high number of MET claims, it was considered appropriate, for the purpose of the preliminary investigation, to limit the on-spot verification visits to the four exporting producers of the group.

(35) The Commission sought all the information deemed necessary and verified all the information submitted in the MET claims at the premises of the four related exporting producers.

(36) It was considered that MET should not be granted because none of them met the first, second and third criteria as laid down in Article 2(7)(c) of the basic Regulation.

(37) As far as criterion 1 is concerned, discrepancies with respect to business decisions and costs were established. It was found that on numerous occasions there was no evidence on payments made for the transfer of companies’ shares. Furthermore contributions either from state-owned shareholders or related parties in fixed assets, land and expenditures converted into shares were not independently evaluated. Finally in one case shares passed from one state-owned shareholder to one of the APP group companies at non-market price. With respect to costs, the investigation established that, account taken of the methodology used by the group to record raw material inputs, there is lack of evidence on the cost of major raw material inputs. Consequently, it was concluded that the four related exporting producers have not shown that they fulfil criterion 1.

(38) With respect to criterion 2, it was established that fundamental International Accounting Standards (IAS) principles and in particular IAS 1 were disregarded (i.e. accrual principle, off-setting, lack of prudence and fair representation of transactions) both in the accounts and in their audit, which put into question the reliability of the companies’ accounts. Consequently, it was concluded that the four related exporting producers have not shown that they fulfil criterion 2.

(39) As far as criterion 3 is concerned, the investigation revealed the existence of significant distortions with respect to land use rights (LUR) relevant to the four related exporting producers. Such distortions point to the conclusion that the LUR are not granted and maintained in accordance with market economy conditions. It was also established on spot that significant distortions exist in loan attribution to the four related exporting producers from the Chinese banking/financial sector. Most of the loans were given by banks with significant shareholding by the State while clear indications exist that general state industrial policies were taken into consideration by financial institutions when establishing the group’s creditworthiness which resulted in providing loans to companies that were in a bad financial situation. Account taken of all the above, it was consequently concluded that the four related exporting producers have not shown that they fulfil criterion 3.

(40) APP and the Union producers were given the opportunity to comment on the above findings.

(41) The Union producers agreed with the above findings. They also disputed arguments made by the Chinese exporting group as to being granted MET because the Commission is simultaneously conducting an anti-subsidy investigation.

(42) The Chinese exporting group did not agree with the above findings.